Food prices to spike without EU trade deal, warn UK retailers

UK’s retail industry warned again that food prices would shoot up from next year if new tariffs were imposed.

Tariffs in UK stores will go up by more than 20 percent on average in case of no trade deal with the EU [File: Neil Hall/Reuters]

With the prospects for a post-Brexit trade deal between the United Kingdom and the European Union looking increasingly precarious, the UK’s retail industry warned again on Friday that British shoppers would face higher food prices from next year if new tariffs were imposed as a result of the government’s failure to reach an agreement.

The UK’s Brexit transition period ends on December 31, and if the UK and EU cannot reach a deal the UK would be forced to trade with its European neighbours on World Trade Organization (WTO) terms, which would mean new tariffs.

British Prime Minister Boris Johnson said on Thursday there was a “strong possibility” the UK would not secure a deal.

“Currently, four-fifths of UK food imports come from the EU and without a tariff-free deal, supermarkets and their customers face over three billion pounds ($4bn) in tariffs from 2021,” said Andrew Opie, director of food and sustainability at the British Retail Consortium (BRC).

The BRC said tariffs would force food retailers to raise prices to deal with the additional costs.

It said many non-food retailers would also face large tariff bills for EU-sourced products, including clothes and ceramics.

Average tariffs of more than 20 percent

Under the UK’s new tariff schedule, which would apply from January 1 if a deal is not agreed, 85 percent of foods imported from the EU would face tariffs of more than 5 percent.

The average tariff would be more than 20 percent, including 48 percent on beef mince, 16 percent on cucumbers and 10 percent on lettuce.

The BRC also highlighted the challenges January posed for seasonal produce, with a much higher proportion of fruit and vegetables imported from the EU at that time of year.

For example, the UK sources 85 percent of its tomatoes from the EU in January copared with 30 percent in June.

It said retailers had increased their stock of tins, toilet rolls and other longer life products as part of their planning for a no-deal Brexit.

But it said continuing uncertainty surrounding new checks and red tape from January 1 was likely to cause disruption to the supply of many goods.

The UK left the EU in January and has since been in a transition period, with rules on trade, travel and business unchanged. That ends on December 31.

If there is no agreement to protect approximately $1 trillion in annual trade from tariffs and quotas, businesses on both sides will suffer.

The EU and UK are at loggerheads over fishing rights, economic fair play and dispute settlement, despite months of talks. The two sides have set a deadline of Sunday to come to an agreement and prevent a chaotic break.

Disruption ahead

In a sign of potential disruption ahead, trucks heading towards the English port of Dover were queued up for miles on Thursday, with Brexit stockpiling and pre-Christmas traffic blamed.

Grocers fear significant disruption to their “just in time” supply chains when the Brexit transition period ends shortly after the Christmas rush.

Delays of even a few days as post-Brexit customs checks come into force at ports could make fresh produce unsaleable and lead to shortages of some products.

Supermarket groups have stockpiled where they can but warehouse space is scarce with most required to service Christmas, the busiest period of the year for food retailers. And although they will seek to build stocks further once Christmas is over, fresh produce such as salad and fruit simply cannot be kept for long periods.

Source: Reuters